Inventory Control with Supply Backordering

Marko Jakšič ()
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Marko Jakšič: University of Ljubljana

A chapter in Operations Research Proceedings 2013, 2014, pp 217-222 from Springer

Abstract: Abstract We study the inventory control problem of a retailer working under stochastic demand and stochastic limited supply. The unfulfilled part of the retailer’s order is backordered at the supplier and that the retailer has a right to cancel the replenishment of the backordered supply, if desired. We show the optimality of the a base-stock type type policy and derive the threshold inventory position over which it is optimal to cancel the replenishment of the backordered supply. We carry out a numerical analysis to quantify the benefits of supply backordering and the value of the cancelation option.

Keywords: Cancelation Option (CO); Inventory Position; Retail Workers; Optimal Base Stock Level; Full Backordering (FB) (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:spr:oprchp:978-3-319-07001-8_29

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DOI: 10.1007/978-3-319-07001-8_29

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